How to use a credit card wisely: 6 tips

A credit card offers several benefits to a cardholder. Not only is it a convenient payment tool that lets you make purchases online or in person, virtually anywhere in the world, but it also gives you the opportunity to build a credit history. With a good credit history, you position yourself as a responsible borrower, which can help you get a mortgage, car loan, apartment, or great cell phone plan in the future. If you have a credit card that offers rewards, you can earn travel perks, cash back, insurance benefits, and more.

With many advantages of a credit card, you want to make the most of what your card has to offer. Discover 6 ways to get your credit card working for you. 

1. Pay your credit card bill on time 

Perhaps the most important rule of thumb when it comes to using a credit card is to pay your bill on time.

As you use your card, you will accumulate a credit card balance – this is the total amount of money you owe on your account. At the end of your billing cycle (which is typically about 30 days long), you will receive a statement that outlines your balance, minimum payment due, and your due date for paying.

Paying your credit card bill by the due date is important for many reasons: 

• It helps you build and maintain a good credit score

• If you pay your total account balance, you will avoid interest charges

• You will keep your account in good standing, which can enable you to qualify for a higher credit limit in time

• Getting in the habit of regularly paying your bill helps you develop strong credit habits that can last a lifetime  

Tip: Set up a pre-authorized recurring payment for either the total account balance or the minimum payment, so that your credit card bill automatically gets paid on time.

2. Make more than the minimum payment  

It’s in your best interest to pay your total account balance in full every month. That way, you don’t incur interest charges, and you keep your full credit limit available for the following month.

However, life can be expensive and unexpected, and it’s not always possible to pay off the total account balance in full. When this is the case, it’s important to pay as much as you can – and at least the minimum payment. Making the minimum payment every month is crucial for maintaining your credit score and keeping your account in good standing. Your minimum payment is clearly stated within online or mobile banking, as well as on your statement. One easy way to ensure your minimum payment is made every month is by setting up automatic payments from your bank account to your credit card account.

It’s worth noting that your statement will show you how long it would take to pay off your credit card balance when you only make the minimum payment, which can provide strong motivation for paying more than the minimum every month. 

Tip: If you find you’re not able to pay off your balance each month or you’re always reaching your credit limit, it could be a sign that you are overspending. Spending only what you can afford makes it much easier to stay out of credit card debt.  If you do carry a balance, a lower interest rate card can help you save on interest charges.

3. Stay below your credit limit   

Your credit card issuer looks at several factors when determining what your credit limit will be – including your credit history, income level, employment status and overall financial situation. If you don’t know your current credit limit, you can find it on your monthly statement. 

A good way to ensure you stay below your credit limit is to set up credit limit warning alerts on your credit card account to get notified when you are approaching the credit limit on your card.

Tip: Do you feel you need a higher credit limit? As time goes on, if your institution sees good behaviour on your credit card, they may offer you a credit limit increase. If you’d like a higher limit sooner than that, you can try requesting a limit from your credit card provider. 

4. Take advantage of any rewards  

If you choose a credit card with rewards, you will want to take advantage of those benefits! Start by learning how you earn and maximize your rewards. 

For instance, some cards offer a higher earning rate if you spend on certain everyday items, such as gas and groceries. Instead of earning one point for every $1 you spend, for example, you may earn two or three points for the same spend in these categories.  It’s also a good idea to find out where you get the most impact from your points. For instance, you could redeem 15,000 points for a short-haul flight or a statement credit that goes towards paying your credit card bill – one may be more valuable to you than the other and understanding how your program works can help you make the most of it.  

5. Keep your credit card safe

Your credit card is a secure payment method, as most cards offer protection against unauthorized charges. For example, if you’re the victim of credit card fraud and your card is used to make fraudulent purchases, if your card comes with Zero Liability Protection you would not be responsible for the charges, provided you have taken reasonable precautions to protect your PIN and your card. To that end, you shouldn’t share your PIN with anyone, and you should only use your card in places where it is safe to do so. Never give your credit card number over the phone unless you initiate the call, and only make online purchases from recognized retailers. Even then, only buy from sites that have security features such as a URL that begins with HTTPS or a key or lock symbol at the bottom of the screen.

In today’s world, a physical credit card isn’t needed to make most purchases.  While lost or stolen cards can be ‘locked’ and reported quickly, a compromised account number from a data breach can be hoarded by a fraudster for weeks or months before any fraudulent use. Here are some tips to help keep your information safe:

• When making a purchase, tap or insert the chip first. This will protect you from having your card skimmed.  And always remember to take your card when the transaction is done.

• Protect your PIN: memorize it, don’t share it with anyone or write it down.  Choose a PIN that can’t easily be guessed – don’t use your birth date or address.

• Never lend your card or disclose your PIN to anyone else

• Never give out your card number over the phone or Internet unless you know you are dealing with a reputable company.

• Always check your card when it is returned to you after a purchase. Make sure it is YOUR card.

Most importantly, make it a habit to regularly check your transactions through mobile or online banking.  It is also a good practice to review your statement monthly. If there are any charges that you didn’t make or don’t recognize, report it immediately.

If you have an RBC Royal Bank credit card and you are concerned that it is lost, stolen or otherwise compromised, here are a couple of ways you can keep it secure: 

• If you have simply misplaced your card, you can temporarily lock it through RBC Online Banking or the RBC Mobile app until you find it.

• If your card has been stolen or permanently lost, call the 24-hour toll-free number at 1-800-769-2512. The card will be blocked from future use, and you will be issued a new card.

• If you notice a transaction you don’t recognize, you can dispute a credit card transaction or report a fraudulent transaction through RBC Online Banking or the RBC Mobile app.  

6. Know your credit card terms and conditions  

Anytime you apply for a credit card and receive it in the mail, it is accompanied by a package of important documents that includes the terms and conditions of your credit card. Be sure to review these documents to understand the specific details regarding your credit card. Sometimes, your credit card issuer will make some changes to your account and when they do, they will notify you of any significant changes in advance, so be sure to keep an eye on your statement so you don’t miss out on important information about your account.

A credit card is a convenient payment tool that can be used for anything from small, everyday items to major purchases. By making the most of your credit card, you can avoid unnecessary fees, potentially earn rewards, and build your credit history all at the same time. Still deciding on a credit card? Take a look at our 5 Tips to Consider When Choosing a Credit Card in Canada.

Share This Article